Sunday, December 4, 2011

Doing it better Downunder

Looking at the on-going crises of the eurozone, the problems of the UK, the serious economic slump in the US all give grounds for appreciation of how much better Australia's political class has performed compared to those of other Western countries.

The Hawke Government (1983-1991) did broad economic reform; the Keating Government (1991-1996) reformed "super" (expanded private pension arrangements) and some labour market reform; the Howard Government (1996-2007) did more labour market reform, tax reform and massively retired public debt; the RBA brought in explicit (inflation-over-business cycle) targeting (1993). Our political class Downunder has done so much better than most other folks'.

Folk such as Paul Krugman banging on about how worrying about debt was way over-rated did not help. (Taking reassurance by comparisons with very high post WWII debt was not appropriate--there is a difference from debt generated by a major emergency and debt being structurally generated; there is also a vast difference between positive baby-boom demographics and "easy" technological growth--catching up with the US--compared to adverse fertility-crash demographics and more restrained technological growth--more countries near the technological edge.)

Australia had very bad 1890s and 1930s depressions in large part due to high public debt levels, so economic history encouraged scepticism Downunder about high structural debt levels. Holding the recent commodity boom to be solely, or even mostly, responsible for Australia's much better economic performance than other developed economies underplays decades of sustained reform effort by Australia's political class.